The doldrums are followed by recovery: after the brief slump in March 2021, the gold price is again at a high level that it had never reached in the previous ten years. We are not talking about raw materials here, however. Even in the Basel III framework of the Basel Committee for Banking supervision at the Bank for International Settlements (BIS) it is said that it is much more like a stranger treat currency. The volatility of gold is more like that of a foreign currency. That’s why they should treat the raw material like one.
But what does that mean? First of all, Basel III defines the capital requirements for banks. They replaced Basel II after the banking and economic crisis and should incorporate the bad experiences. “Basel III includes recommendations that are supposed to make the financial world more stable”, sums up the Federal Ministry of Finance in his statement. For this purpose, a upper debt limit (leverage ratio) and two new liquidity ratios (liquidity coverage ratio and net stable funding ratio) have been introduced. These recommendations, which also stipulate a capital requirement of 10.5 percent in total , will come into force gradually until 2023. & nbsp;
Basel III: Gold on the same level as currencies
This framework has now been largely implemented in national law. The fact that gold is treated like a foreign currency -i.e. a foreign currency- has several effects at the same time: The raw material is generally considered to be a financial security and stable in value. Many investors therefore invest a certain proportion of their assets in gold in order to diversify their portfolio and make it crisis-proof. Inflation or bursting speculative bubbles? Gold retains its value. The fact that banks should now treat gold like a currency strengthens its protective function. Many central banks have therefore exchanged massive amounts of their US dollars and euro bills for gold in recent years. The hard currency is also becoming increasingly popular again in German private households in the wake of the coronavirus pandemic, slowed economic growth and inflation, according to a study by Reisebank shows. & nbsp;
Gold is gaining in importance for banks
With the latest changes in Basel III, the importance of gold and other precious metals is likely to increase again. Then they stand as core capital on the same level as government bonds and other currencies instead of the previous third-tier funds. Banks can invest up to 20 percent of their equity in it. In the medium term, and especially if inflation persists, the gold price could continue to rise despite the current high level. In contrast to euro and dollar bills, which can be printed at will, gold as a natural resource is limited. This is another reason why it is considered risk-free. The simple market rule of supply and demand does the rest. & nbsp; We will be happy to clarify whether an investment in gold is worthwhile, in what amount and which other investment options are available for you at a personal consultation. We take a close look at your financial situation and examine the best solutions individually based on your requirements and needs. Contact us today.
